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November 14, 2007

Wall Street Journal and Digg: A Brilliant Cram

Up to now, the Wall Street Journal has been one of the very few media outlets able to sustain a paying audience for its electronic version. They were able to do so because a) it was priced reasonably as an add-on to a paid newspaper subscription, and b) because of their unparalleled authority and quality of writing and research. Basically, the WSJ brand was what enabled them to charge for it when no one else could.

But, long term, that was a losing battle. Traditional journals have been slow to react to the changes wrought by blogging and social media, and even TV, cable and other media before that, and have been on a steady downhill decline for decades. It is very uncommon to see someone in their 20s or 30s reading a "real" newspaper, and the trust gap has been rapidly closing with the younger generation now considering newspapers and blogs on par.

In a very real sense, the print journal readership is dieing off, and as those in their 60s, 70s and even 80s take their subscriptions to the grave, they aren't being replaced with new readers. Holding out even this long to make basic changes to their business model has put at risk the very foundations of their business, namely the relevance and brand recognition that could sustain a future.

My partner at The Disruption Group, Mike Urlocker, has written extensively about disruption of traditional print media, so I will simply refer you to the lengthy list of analysis of this phenomenon that we've already done on the subject below:

It has been inconvenient for me, as a blogger, precisely because the WSJ stories often offer better information than other sources and a different take on the news, and so although I've referenced them, links to their articles have only been available to those who already had a paid subscription or who were willing to pony up to read that article. But yesterday, that all changed in a brilliant stroke of business strategy between an old titan and a new one.

Digg Makes Wall Street Journal Online Edition Free

As of yesterday, the Wall Street Journal now adds a Digg widget to the end of all their online articles. And, any article that gets 'dugg' will be available to read for free if you go through Digg's site to get there. The online journal is still a pay-to-read site, but this loophole ensures that anything I want to reference will be available to my readers, because all I have to do is Digg it. Ultimately, that means the online WSJ is now free, as long as every article gets dugg at least once. But, it also means that Digg gets a huge wallop of credibility and traffic thanks to the Wall Street Journal, and a whole new business audience. And, the Wall Street Journal maintains some vestiges of its walled garden, but will have sudden street cred and accessibility with bloggers because of Digg. Wow. I wonder if this deal has anything to do with Murdoch's pending takeover of Dow Jones -- it certainly is one of the smarter and more aggressive plays for a traditional media player to finally enter the new world.

This is a classic example of what Christensen labels "cramming" in his discussion of disruption theory. Basically, incumbents often ignore disruptions until it is too late to do anything about it, and then make valiant attempts to "cram" the disruptive innovations into their existing offering to try to forestall or block the disruption. This can be accomplished through a purchase or merger (e.g. when Time Warner and AOL conjoined), or as in this case, by incorporating the new thing into the old in a way that is a bit kludgey, but offers a strong mutual benefit and breaking down of the walls.

Most crams eventually fail. The disruption either still wins because the business models are incompatible, or they eventually subsume the old business into the new and the vestiges of the old simply die off. AT&T, for example tried various crams (buying NCR, buying cable networks, starting and then selling a mobile phone business, etc.) before selling each off and destroying hundreds of billions of dollars of shareholder value. AT&T very nearly died in the process, and it was only the merger back into its former spin-off baby bell that saved the AT&T brand from extinction. And, it still may not survive.

This cram, however, makes big sense for both sides, especially as an important signal by the Wall Street Journal that it will be a significant social media player. Still, it will depend on what they do next. Print, and the capital that is tied up in buildings, printing presses, distribution networks, and massive staffs (most of whom aren't necessary in the new blogging world) is an albatross that makes all newspapers unable to effectively compete against the low-end disruption of blogs. Even the venerable Wall Street Journal with its quality, brand and history can't survive forever if its subscribership continues to decline and advertisers either go elsewhere or demand lower rates or both. They still need to fundamentally rethink their business model and make much more significant changes in the very near term, or this could also be a signal of the beginning of the end.

But I think Murdoch is smarter than that, and I look for more exciting and surprising changes to come.

Significantly, there is no mention of this deal to be found in the Wall Street Journal itself (strange that they said nothing, but let every other major news outlet report it), or I would have dugg the article so I could insert it here to show you, however, the folks at Digg didn't ignore the news.

Comments

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Hey Paul,

It would be interesting to know what percentage of their operations are funded by subscriptions.

Because in the rest of the industry, subscriptions are basically a loss leader, almost. Giving it away for free and increasing readership can actually be more profitable if it increases reach significantly...